Note 6 - Financing Arrangements |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Oct. 02, 2011 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Debt Disclosure [Text Block] |
Note
6 – Financing Arrangements
Factoring
Agreement: The Company assigns the majority
of its trade accounts receivable to CIT under factoring
agreements. Under the terms of the factoring
agreements, which expire in July 2013, CIT remits payments to
the Company on the average due date of each group of invoices
assigned. If a customer fails to pay CIT on the
due date, then the Company is charged interest at prime plus
1.0%, which was 4.25% at October 2, 2011, until payment is
received. The Company incurred interest expense of
$16,000 and $18,000 for the three-month periods ended October
2, 2011 and September 26, 2010, respectively, and $33,000 and
$35,000 for the six-month periods ended October 2, 2011 and
September 26, 2010, respectively, as a result of the failure
of the Company’s customers to pay CIT by the due
date. CIT bears credit losses with respect to
assigned accounts receivable from approved customers that are
within approved credit limits. The Company bears
the responsibility for adjustments from customers related to
returns, allowances, claims and discounts. CIT may
at any time terminate or limit its approval of shipments to a
particular customer. If such a termination were to
occur, the Company must either assume the credit risk for
shipments after the date of such termination or cease
shipments to such customer. Factoring fees, which
are included in marketing and administrative expenses in the
accompanying consolidated statements of income, were $120,000
and $153,000 for the three-month periods ended October 2,
2011 and September 26, 2010, respectively, and $203,000 and
$287,000 for the six-month periods ended October 2, 2011 and
September 26, 2010, respectively. There were no
advances from the factor at either October 2, 2011 or
September 26, 2010.
Notes Payable
and Other Credit Facilities: At October 2, 2011 and
April 3, 2011, long-term debt of the Company consisted of (in
thousands):
The Company’s credit facility as of October 2, 2011
consisted of a revolving line of credit under a financing
agreement with CIT of up to $26.0 million, which includes a
$1.5 million sub-limit for letters of credit, with an
interest rate of prime plus 1.00%, which was 4.25% at October
2, 2011, or LIBOR plus 3.00%, which was 3.22% at October 2,
2011, maturing on July 11, 2013 and secured by a first lien
on all assets of the Company. As of October 2,
2011, the Company had elected to pay interest on the
revolving line of credit under the LIBOR
option. Also under the financing agreement, a
monthly fee is assessed based on 0.25% of the average unused
portion of the $26.0 million revolving line of credit, less
any outstanding letters of credit. This unused
line fee amounted to $14,000 and $12,000 for the three-month
periods ended October 2, 2011 and September 26, 2010,
respectively, and $30,000 and $22,000 for the six-month
periods ended October 2, 2011 and September 26, 2010,
respectively. As of October 2, 2011, there was a
balance on the revolving line of credit of $1.2 million,
there was a $500,000 letter of credit outstanding
and the Company had $20.7 million available under the
revolving line of credit based on its eligible accounts
receivable and inventory balances.
The financing agreement for the revolving line of credit
contains usual and customary covenants for agreements of that
type, including limitations on other indebtedness, liens,
transfers of assets, investments and acquisitions, merger or
consolidation transactions, dividends and transactions with
affiliates. The Company was in compliance with
these covenants as of October 2, 2011.
Minimum
annual maturities as of October 2, 2011 are as follows (in
thousands):
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